Panel eyes business tax cuts

Private boat, plane tax possible

Posted: Wednesday, September 05, 2001

By JOANNA MARKELLTHE JUNEAU EMPIRE

Dan Johnson's Juneau-based company, The Competitive Edge Office Systems, sells office equipment and furniture for companies such as Xerox. When Johnson sells a product, the city charges sales tax on the item and the commission. Pointing to what he called an unfair tax structure, Johnson and his company asked Juneau Assembly members for help.

After months of discussion and some cajoling from Assembly member Dale Anderson, the panel's Finance Committee on Tuesday forwarded an ordinance to the full Assembly that would exempt agents such as The Competitive Edge from sales tax on commissions.

The panel also reviewed the possibility of a motor vehicle registration tax, a $2,000 exemption for some property taxes and a "flat tax" on aircraft, boats and motor vehicles.

In the case of agent sales, Anderson said taxing the sale and the commission is "double taxation."

"I think the Assembly is moving in the right direction in looking at important aspects to make the community a friendly place for businesses to operate. This community cannot exist without small business," he said after the meeting.

The change would apply to commissions paid to an agent for negotiating the sale or lease of tangible personal property, in other words, something that can be moved, City Finance Director Craig Duncan said. It would not apply to real estate transactions, for example.

According to the city Finance Department, the change could cost the city $170,000, a figure Anderson said is overstated. Johnson said a less burdensome tax structure that benefits business would expand the community's tax base in the long run.

The proposal was one of four business-related tax changes the Assembly's Finance Committee reviewed Tuesday. Another proposal forwarded to the full Assembly would exempt the first $2,000 on what's called business personal property assessments. Not only would the change benefit small business, but it would be less work for city employees, Duncan said. The exemption would cover 30 percent of local merchants and cost the city $49,774 in revenues.

"It wouldn't alleviate all of the work, but it would alleviate some of the work," Duncan said.

The committee also reviewed options for property taxes. Local aircraft owners challenged tax assessments at a Board of Equalization meeting in May because they said commercial aircraft illegally were taxed at a higher rate than other business property. Currently, property tax is levied on commercial aircraft and commercial vehicles but not on private aircraft, commercial boats, private boats and private vehicles.

Wings of Alaska President Bob Jacobsen said a broad-based tax would be better for everyone.

"We agreed to a compromise (in May) that came no where near to solving the problem. I appreciate the fact that the Assembly now is recognizing how significant a problem it is," he said. "I'm not opposed to paying fair taxes."

Assembly member Marc Wheeler said taxing commercial transportation would be better than taxing private boats.

"People use boats to get food in Juneau. I'd hate to tax a 14-foot Lund that someone uses to go fishing," he said.

Assembly member Ken Koelsch suggested the city eliminate the tax on aircraft unless everyone is treated the same.

"I think to be fair, we need to tax other entities or get rid of this," he said.

The committee asked staff members to bring back more information about a flat tax or variation thereof on aircraft, boats and motor vehicles.

Finally, the committee reviewed a proposal that would decrease the existing $7,500 sales tax exemption cap on goods and services to $3,000. The change could result in a revenue loss of between $800,000 and $900,000. To make up the difference, the city could implement a motor vehicle registration tax, Duncan said.

The state would collect the tax when vehicle owners acquire or renew their licenses. The tax would be an average of $30 to $34 a year per car and would decrease as the vehicle got older, according to the city.

Rob Skinner of Capital Chevrolet said a reduction in the sales tax exemption cap would help local businesses compete with merchants elsewhere.

The proposal was listed as an informational item. Assembly member Frankie Pillifant said it was worth further exploration.